(Reuters) -JPMorgan Chase's third-quarter profit dropped as it set aside more money to cover potential loan defaults, while rising interest payments and investment banking revenue lifted its shares before the market open.
Banks are building up stockpiles - which act as a safeguard when borrowers default on their loans - to typical levels as consumers deplete the savings they built up during the pandemic.
JPMorgan set aside $3.11 billion for likely credit losses, compared with $1.38 billion a year ago, even though consumers' financial health has remained solid despite elevated interest rates and fears over unemployment.
The investment bank raised its forecast for net interest income (NII) - the difference between it earns on loans and pays on deposits - to $92.5 billion. It was expecting $91 billion, while analysts polled by LSEG had forecast $91.05 billion.
Wall Street expects NII for the industry to shrink in the coming quarters after the Federal Reserve cut interest rates last month.
The bank's CEO, Jamie Dimon, maintained his guarded tone on the economy.
"We have been closely monitoring the geopolitical situation for some time, and recent events show that conditions are treacherous and getting worse," Dimon said.
"There is significant human suffering and the outcome of these situations could have far-reaching effects on both short-term economic outcomes and more importantly on the course of history."
INVESTMENT BANKING SHINES
The bank's Wall Street operations were a bright spot as the prospect of monetary easing spurred a rally in equities in the third quarter and boosted dealmaking.
Investment banking fees surged 31%, double the management's guidance of 15% last month. Strong performance in equities pushed trading revenue up 8%, higher than the up to 2% guidance the management had given last month.
Overall, profit fell 2% to $12.90 billion for the three months ended Sept. 30. Earnings per share of $4.37, however, exceeded expectations of $4.01, according to estimates compiled by LSEG.
Shares rose about 2% to $217.23 in premarket trading, adding to their nearly 25% gains this year.
(Reporting by Niket Nishant in Bengaluru and Nupur Anand in New York, Editing by Lananh Nguyen and Arun Koyyur)